Episode Transcript
[00:00:00] Speaker A: Welcome to the Relay, the legal show for personal injury law firm owners, presented by Lexamica, the number one attorney referral network. I'm your host, Gabriel Stiritz. Here's what I'm thinking about today. If you're running a plaintiff firm right now, you've probably noticed something. Phone calls from private equity groups and aggregators haven't stopped. And if anything, they've gotten more sophisticated and more persistent this year. And that raises a question every firm owner should be asking themselves. Whether you want to sell or not, is my firm actually worth in this market and what's driving these valuations? Joining me today is Tom Lenfestey, who's been in the middle of more plaintiff law firm transactions than almost anyone in the industry. Tom's advised on deals ranging from single practice shops to nine figure platform acquisitions. And he's got a front row seat to how capital is reshaping our industry. So here's why I want to have the conversation now at the end of 2025. Going into 2026, we've seen some megadeals getting closer to close. We've seen some things fall apart and buyer behavior shifting in ways that may, may have caught people off guard.
Today we're going to unpack what actually happened in 2025.
Was it what we expected? The deals, the multiples and what buyers were looking for? And then we're going to look ahead to 2026, because if you're a law firm owner thinking about an exit in the next three to five years, the decisions you make now about your law firm structure, those are the things that will determine whether or not you're an attractive acquisition target or not. Tom, thanks for being here. Let's get into it.
[00:01:23] Speaker B: Yeah, thanks for having me, Gabriel. Excited to discuss.
[00:01:26] Speaker A: So, Tom, real quick, for those of you who haven't heard you on the show before, what do you do and why? Are you the guy who knows about this?
[00:01:35] Speaker B: Absolutely. So, Tom Lenfestey, I founded the Law Practice Exchange. I'm an attorney and CPA by degrees. Gave up those private practice realms years ago to really form the law practice exchange 13 years ago to help lawyers do just what we're going to talk about, buy and sell law firms. And then the market over those years has continued to evolve and change. I started it when there wasn't really any market you could discuss with law firm owners about, well, I don't know, how could you sell a law firm or could you sell a law firm? And so it's great to see the evolution, of course, and the Growth of the marketplace for buying and selling. But that's what the law practice exchange does.
We do it in two ways. We run a tech platform called The Marketplace Law which really allows buyers and sellers to directly enter, search, match, connect, hopefully create deals. And then we have our LP advisory which does private market intermediary deals with larger scale firms and also help those in the marketplace and outside just create the deal flow and the continuation to really get to that hopefully successful transaction. So we've been at it a while. Thousands of attorneys and law firms that we've worked with. I think last data I was looking at for like law firm valuations put us up as like 600 transactions for actual market comps for law firms of varying practice areas.
So happy to say, I think, you know, we've got a good ownership of this space.
[00:03:02] Speaker A: Yeah, that's amazing. There is not another platform where lawyers are posting their firms at that clip. So what is it that you're seeing right now? What, what is 25? How did it shape up by the numbers? How does 25 compare to 2024?
More volume, less volume. What's, what's standing out to you?
[00:03:22] Speaker B: Absolutely. Well, I think 25 started with every investor, private equity potentially starting to get wind of the opportunity that was in, you know, the law firm space about could you own a law firm? Right. What had Arizona done with ABS, this non attorney ownership? How would it potentially work? And I do joke that I think they all sat around and read the same thesis paper that said you can invest in law firms. And then it was really, you know, the end of 24 into 25, just lots of calls and interests. Right. So from private equity, individual investors, some of those being ex lawyers that moved into private equity that had built out, but really, you know, learning I would say was the biggest thing. Some early movers which you know, were successful in completing transactions. But the end of 24, the beginning of 25 was just a lot of interest. Right. A lot of, just the spike of really, how do we do this? We want to look at every law firm that's available. Right. It wasn't really having a plan. It was more about the excitement of moving into that space. And I think that, do you think.
[00:04:31] Speaker A: There was a component of FOMO in there as well with the ABS deregulation? Everyone's well, I don't want to miss the boat on this initial wave of I got to get in and take a look at this because somebody else is going to eat my lunch. Or was it more excitement driven, hey, there's an opportunity here. It's something that's novel. I mean, I'm sure. I know it's both, but, like, how much of it do you think there was a. A. Everyone's looking over each other's shoulder.
[00:04:56] Speaker B: I think FOMO was a huge part of it, especially because when you look at investment into CPAs, accounting firms, which probably, you know, which has been around for years longer than law firms, but really picked up steam in the last five years. And so a lot of the private equity that we talked to had either come out of that space or were kind of evolving out of that space where they had invested in some early movers, help those grow. And we're exiting now or others. To your point, Gabriel, they had missed out. Right? Like, it had become so competitive for investment into CPA firms that a lot of these groups had not moved fast enough, and they didn't want to miss the boat on what they saw as, you know, one of the last professional industries to really partner with outside investment.
And so I do believe, like, you know, FOMO was a big part of it.
[00:05:45] Speaker A: Right. But so. And just to, like, drill down into that, FOMO drives a lot of, like, really early motion before people really understand what's going on. Right. You can get this bum rush. Everybody, like, shows up at the counter, and then they start to look really hard at it.
The parallel with cpa, probably with other professional practices, everyone sees this as really strong Law is the last frontier because of the regulatory environment. I gotta go run at it.
Do you think that. That. That the parallels stood up enough to start seeing those transactions happen where people are basically, these are CPA in it by another name or some things started to break down in the parallels, and people kind of slowed as they got closer to closing on the deals or something else that I'm not thinking about.
[00:06:32] Speaker B: No, I really think, to your point, this mass excitement, this mass interest, but no plans, really, no understanding of the law firm model and why it's different from CPAs or why it's different from insurance or dentistry or health services and. And law. I mean, we love to say it as lawyers, but overall, like, it is different and the. The evolution clear.
[00:06:53] Speaker A: Like, plaintiff law is even more different because you're talking contingency rather than hourly build practice areas that do come in at least more in alignment with some other types of professional services. But no one's doing your taxes and saying, hey, I'll take 30 of whatever tax cut I can get you. That would be a sweet deal. Maybe I should go into that.
[00:07:14] Speaker B: Yeah. And I think that's really it. I mean, we had private equity that was like, look, I've heard good things about personal injury. We'd be very interested there. Heard the margins. Right. Everything else. Or they were coming from an area where they kind of understood that, but they really didn't understand the business model. Right. For plaintiff firms, they really didn't. And so then it was, you know, where we worked was really in the qualification of those potential buyers, investors, trying to help them as much as we could to educate on the space and the nice evolution. I think, Gabriel, as we've seen some of that excitement that FOMO like, those firms have kind of filtered. They've settled a little bit, They've got distracted. You know, they look at 100 deals per month or whatever, like they're moving. Right. But the overarching is some of them said, okay, well, we want to understand this. And then I think that's really what we've seen. The success of the market over 25 is really the build out of what people are calling the MSO model. You know, or if you like, we call it the lso, which is really this, you know, managed service organization or this legal service organization.
Which really was the next evolution after the excitement was those that were kind of like, okay, we want to invest in plaintiff. We want to put together a deep bench for a managed organization to help invest and grow plaintiff. So we're going to bring best in class, you know, tech innovation, best in class marketing. Like, how do we build that, you know, MSO LSO out. And those are the deals that were successful in 25, because they didn't just say, we want to invest. It was more about what is our purpose, what is our plan, how are we going to make this successful? And they deep dove into certain practice areas. So we had.
[00:08:56] Speaker A: So let's for sure, let's drill down into that a little bit. And our audience here is we're talking about injury law firms specifically.
What did that volume look like for 25 in real transactions? How many roughly deals did you see get put together or law firm buyouts of some type? Kind of. What are the headline numbers there?
[00:09:18] Speaker B: Yeah, I think in the plaintiff space. Right. Overall, you probably saw somewhere between 25 and 50 overall transactions get done. Not all of those with, you know, private equity. And, you know, this MSO structure, I think on a larger scale, you're probably talking about, you know, somewhere between that 5 to 15 mark.
But a lot of the inroads were made to really set us up for more so of next year growth. And there's always a lot more deals done on a smaller scale firm. So, you know, if you're Talking about a million dollar 2 million plaintiff firm, you know, those are just sometimes easier deals to tuck in. We still have a lot of geographic expansion happening with law firms. Those are a little bit harder to track.
But anything of scale, I would say you're at those numbers and I think.
[00:10:07] Speaker A: A lot of it is so like 25 to 50. So somewhere in the range of $500 million of transaction value, let's say 10, 10 million for 50 transactions a piece, roughly.
[00:10:20] Speaker B: And I think.
[00:10:20] Speaker A: And what.
Go ahead.
[00:10:22] Speaker B: I was just going to say I think the biggest thing to that is, you know, the ripple effect of what it has to those lawyers sitting in those markets, right. When they see these transactions get done with another law firm or an MSO or, or anything else, there is this wow, so and so you know, brought in this like they're moving. What does that do, you know, to my business, which I know, you know, is part of the. What are the.
[00:10:45] Speaker A: What are the biggest blockers to more volume, would you say, Tom, Is it on the buy side an understanding of how to structure the deals? It on the seller side being able to get the multiples right or, or to be able to get their operations to what the buyers are looking for? Where. Where do you see the bottlenecks for TR volume going up?
[00:11:02] Speaker B: It's on the sell side.
Right. And you brought up the multiple aspect. I mean, there's sellers that understand what is feasible, what is possible. And if you're a plaintiff firm owner making really good money and you've built a great business, there is probably a. What is your incentive to look at selling or taking on investment, anything else. Right. Unless the multiple really is right. And that's what, you know, 25 and 26 will be about, is setting those market multiples right, based on those price firms or otherwise.
Because, you know, again, if you're making, you know, nine, $10 million in profit a year and you're having a great time, you know, with your team, you're flying around the country on your jet. Otherwise, like, what is your incentive to sell?
I think for a lot of our plaintiff owners that have invested, created good businesses that are law firms, those discussions were had with, you know, private equity and otherwise. But really it's just the, it's a mismatch right now based on what the buy side is willing to do because they're working off a thesis of we want to buy for this, we want to help you grow in scale. And then we're all going to potentially like, you know, divest exit later in three, four, five years, you know, at this increase value. But they're operating on that if, if they jump in and they're paying for what they think they can exit for, right? That's just where that mismatch happens. So it's on the sell side and some of it.
[00:12:28] Speaker A: Go ahead. So. So it's on the sell side. The. Is it the seller's looking for more cash up front than the buyers are willing to pay, or is it a disagreement about enterprise value over the durate, over the duration of the. The period that they're. That they're in business together?
[00:12:45] Speaker B: It's the front end, right? It's really the front end of what if I'm going to give up control, right, of. Of the value that I built, what are you willing to give me on that? So it's not just cash at closing, it's the same, the total. What are we valuing the firm at today?
Not what it could be worth, you know, in five years with your investment or partnership. And some of that, Gabriel, as much as anything is emotions and just pride, right? Which is, I mean, I can tell you whether you're a hundred million dollar firm or you're a $500,000 firm, we've dealt with them all right? Both in between. And there's so much, you know, kind of emotion of like, I'm a lawyer and this is what I do, and I control my firm and I built this.
So we've seen that as well. And it maybe gets compounded a little bit more when, you know, you have certain people say, well, you've done a good job, but here's what we're gonna do, right? We're gonna build this. And there's a little bit like, well, I don't need you to do that, right? Like, I can reinvest my $10 million of profit a year, and I can do this as well. And so there is this emotional challenge of kind of pairing, I would say, you know, 20, 25, we had to do a lot of management of.
Here's PE speak, here's lawyer speak, right? Here's law firm owner fears, here's PE fears. And really trying to bring those together for we're in this place to understand both worlds of just kind of translating a little bit to hopefully get to a successful deal if one is meant to.
[00:14:10] Speaker A: So, yeah, so two questions to that end. I guess I'll. I'll start with, do you think that the movement largely needs to come from how PE understands the value creation valuation of these firms and get more comfortable with assigning a higher value to them once they understand how they work? Or is it from sellers needing to understand the value that the PE or the buyer is going to be able to bring to, to the table over the duration of, of the transaction? I mean, and you could split it down the middle and give me a non answer, but I think I want to pose it as a dichotomy. If you have to pick one, who do you think needs to move more in 26 to get to a good deal framework like, or. Because you're obviously not going to say, well, I don't think deals should be happening. You're here to make deals happen. Somebody's got to move. Somebody's got to get to the place where they're. Where this is going to be able to get closed.
[00:15:06] Speaker B: Yeah, I would say it's of course, an answer of both. Right. And it just comes down to education of, you know, kind of the market overall, right. You know, everybody asks like, oh, what's a multiple that, you know, personal injury firm doing X should sell for? The answer, of course, is it depends. But to your question, Gabriel, and the pick, you know, aside, PE has already moved up, right? Like where Six, nine months ago, they kind of entered the market like, oh, we may be at like three, right. Three and a half. Like, they're already moving up because they see the models and they've educated themselves on. This is a really good model, this business. This one's less. Like they've seen other things that are out there.
[00:15:45] Speaker A: Interesting. So they can assign more granular value to law firms. So they're more comfortable assigning higher values to some and, and conversely lower values to others. So we're getting a larger spread on valuations.
[00:15:57] Speaker B: It's all about risk, especially for those buyers and pe. I mean, the more they, they see potential risk based on lack of systems, right? Lack of, you know, like cyclical as far as lumpiness of cash flow, anything else from that side, you know, they're going to, of course, move that multiple down because they're hoping to improve that and exit. But overall they're trying to minimize, like, if this doesn't work and being new to a market, which most of these PE players are, they already see that risk right there. There is not a proven like, oh, look at this law firm, right? We can look to the uk, we can look to other markets, but there's not this Clear data of like, oh, so and so invested here and they exited here after they grew the firm in the US and so that's the part. But I think what has happened is they have looked at a lot of different models and they said, okay, if we want this, which is what we want, we have to pay for it. Right. We have to pay a little bit more for it. And then the piece comes to that seller education side of. Yes, seller. Your firm's great, but it's not a, you know, 12 multiple. Maybe you heard that somewhere, whatever else. Right. So not a 10 multiple. It's not this. It's this. And let's show you the financial and the metrics of why. Right. And kind of do that to carry that.
[00:17:13] Speaker A: Yeah, no, that's. That's amazing. And it's, it's really clear that the market is getting more sophisticated on the buy side. What are you seeing with sellers of firms are the transactions that are happening more guys who've been looking at this for two years and finally getting comfortable with it. Are you seeing people who are coming in and saying, okay, got it. This is more mature. I can enter, I can exit quickly. I know what I'm about here. The buyers are sophisticated enough that I'm actually interested in doing a deal on the sell side. What is that profile looking like?
[00:17:47] Speaker B: Yeah, I would say it's really not those that have been on the, you know, on the front side of the curve. It's those that, because of their situation. Right. Or because of their strategic decision otherwise, you know, one of the transactions that we helped complete this year, you know, I mean, the owner's my age, right. Like late fees. His biggest thing was looking at a succession plan for, for his firm. Also the aspect of, you know, kind of seeing the tides changing, right. Like seeing, you know, this movement of private equity into the space and really kind of being charged and excited not by just a full exit, like, but also to be part of this growth. Right. So it's more of like a partnership with investment and capital to go do what you need to do while you move some of your chips off the table. So you're like, good. I'm good. Right. I've got my retirement, but, man, I still have lots of energy, lots of excitement, everything else to do that. So to me, it's more of that personal situation ultimately with some of these firms. I think you're going to get to a point of it is going to be a succession crisis that they're going to have to look at bringing on these partnerships because there is significantly valuable right plane of firms that are owned by 1, 2 people of the same age, you know, whatever else. And a certain point where there's not that internal succession program built or whatnot, you know, who can pay for it, is going to be private.
So really making those.
[00:19:14] Speaker A: I mean what I've seen, what I've seen is really there's, there's two camps of people right now. And it's so fascinating. Tom, we could go off a whole tangent about how this industry has gone through this, these very match step cycles because the deregulation of advertising and then you get the founders all starting at the same time and then the first generations.
You've timed things well. And even with the abs, creation has accelerated the kind of the, the end of this cycle with the, with the succession planning for the, a lot of these, these founders. But I'm really haven't seen much other than either you've got a kid who wants to take over the business or you're going to have to sell. I have not seen a single law firm that is really looking at a non buyout, non generational transfer option. I mean, you probably do, you talk to people more, but I haven't. It's fascinating. Nobody's saying, hey, I'm going to sell this thing to Jimmy, who's been around the firm for 30 years but isn't my own child. It's either we're going to sell this to private equity or to a huge firm, or I'll, I'll hand it down to my child. It's, it's really interesting how bifurcated this, the transition planning has become.
[00:20:27] Speaker B: You know, I just put together a piece of content about why internal succession plans typically don't work. And I think that's a lot of it. Gabriel is, you know, the biggest thing is if you're talking about Jimmy, who's been with you forever and good person, like Jimmy's been an employee forever, right. Maybe a highly motivated, great employee or whatnot. But is he ready to go out and you know, work with a private equity loan to buy a $50 million law firm? Probably not, right? Like, you know, if they've been an employee for that long. And it's only in our world where we always talk about internal sale versus marketplace sale, internal sale, you should always consider as that's just one buyer, like one potential buyer, right? Meaning like it may not work out and there's a high likelihood depending on how long these candidates have been there or whatever else that it won't. And So I think that's the mentality of why it's just sometimes, like, easier to go to the marketplace. Plus the funding is there and available. And, you know, you get sophisticated buyers that are ready to contribute value, you know, true value for what you've built and carry that forward. So, yeah, we're seeing the same.
[00:21:35] Speaker A: That makes a ton of sense. Well, it reminds me of the darkest days of, of Walt Disney as a corporation were the ones after Walt left, because you have this really charismatic, really powerful founder and then a bunch of very talented people who are working for him, but who were completely incapable of leading the organization themselves. Very different skill set. And it wasn't for a while that Disney, until the company realized we need a really strong leader to come in. And it wasn't any of the guys who, who were second in command under Disney Senior to do that. Which is exactly to your point. Like, it's. It doesn't matter if you're a small firm or the world's biggest entertainment company. The idea is you really. There's one, There's Gonn. One really, really charismatic person at the top who builds the business and then finding the person to take over from them is probably not the person who was a good fit to work for your charismatic, powerful founder. That's like not the person you want in charge. After that person leaves, likely.
[00:22:38] Speaker B: You know what? One of the most interesting things just to continue that play, though, Gabriel, is if that owner, who, you know, the founder sells to private equity.
Private equity's first focus is that next generation, right? Internal, like, key candidates to say, can we, you know, help them be that next generation of leadership? Right? And that's a key question that, you know, buyers come in, you know, always asking like, well, look, owner's going to stick around for a while, but when they're gone, who. Who can like, especially pe, if it's a straight pe, they don't want to run it. They don't want to run the firm. They want to invest in the firm. Right. And so they're not there to say, you know, how do we handle this, you know, kind of slew of case inventory or how do we handle these of, you know, mentoring and managing attorneys? So it's who's doing that? But that is that first play. So I am hopeful, though, Tech, typically.
[00:23:31] Speaker A: What happens is you get external management team brought in very, very quickly. Is the idea for these law handoffs that it would be different than that? Because, I mean, the classic V play in tech is you run the company up on VC, you sell the private equity and they do exactly two things on day one, they fire 30% of the company and they bring in their external CEO to run the entire business. And I'm not saying that it's going to be the same with law firms, but like it's very clear how it works on, on my side of the fence.
[00:23:59] Speaker B: We're actually seeing to the contrary. And I think the reason is because, you know, these investors, PEs otherwise haven't built out back industry knowledge yet. Right.
So first movers really want to invest in. Especially now. I think the first transactions we're seeing play forward are those ones that they're hoping to build on. Right. If you, you know, complete $100 million personal injury firm acquisition and then, you know, next year you acquire a $25 million one in a different market. Well, the question is how much is that $25 million next level leadership going to help?
But I do think they're really looking at it because they haven't, they don't have that tech team. They just bring in and cut 30% of the workforce overall. They're looking for education and understanding. So I've always said like there's two components to getting a deal done. There's fit and there's financials. We kind of talk about financials like the multiples. What are you willing to pay, what do you want for your firm? But fit is a key component because I will tell you, the early buyers and investors and these sellers are looking for that right. Fit to say they still know they're investing in that founder. Right. Like they're investing in that founder and the people.
[00:25:10] Speaker A: But to be clear that we're in this interesting period where that is true, that won't be true forever. At some point investors will learn how to become operators. They'll surface the operators to run their platforms and then they'll be able to take on deals that they wouldn't where the management team maybe isn't as strong or the owner wants a faster exit from the entire law firm. But we're in this window where we do need management teams for these firms in place because the investor can't come in and do that themselves today. It has to be more of a partnership for the time being. Is that, is that fair to say?
[00:25:46] Speaker B: Absolutely. And that's part of, you know, where I'm very optimistic on this MSO LSO structure build out where as investment gets very intentional and says, okay, we're going to acquire a portfolio of plaintiff firms, you know, of this type in these markets like this is our goal. And we're bringing first in class, you know, tech investment first in class, marketing first. And we have people who understand this, right? Like, we built our team.
It just provides opportunities because, you know, everybody listening and I know, like there's those that have invested and built best in class firms, right? And they're going to be very optimistic, everything else, but there's so many in between that are trying to do the right things, but struggle either to invest in all the new technology.
Right. And to figure this out, or to invest and really figure out, you know, this marketing and how things are changing and to really do these different things. And I think that's where this can be a true win win is like, hey, that's where they can have that knowledge that is collected. Right. And deployed as needed. Because that's the biggest thing about law firms is siloed. Right. Like you and I go to some of these conferences and it's beautiful to have people share ideas and when you see other peer attorneys share what they're doing at Masterminds and everything else to help other attorneys, but otherwise you get to see it. We get to see it. There's one law firm trying to solve a problem, and this law firm one state over is trying to solve the exact same problem.
And they're approaching it in two different ways. And it would be great if somebody could help them collectively solve that. And I think that's where the next generation of like PE MSO is. There's a collective knowledge to help solve some of these problems.
[00:27:28] Speaker A: Sure, sure. And I'm probably blind to, I'm blind to the firms that are running at scale or with decent margins that are just not showing up to the conferences. Because I by definition go to the conferences, whereas you've got, I'm sure you're, you're seeing the ones that are, are not in that camp. Before we wrap, though, you've mentioned lso, mso, abs a few times. A lot of people have maybe heard the term. Not everyone's very familiar with it.
I think it's been an interesting year. 2025, I think we started off in with a lot of emphasis on abs. And even mid year, I was at an event where the people at the very, very top of the industry who are thinking about the regulations. I think I watched the room pivot from is ABS the play to maybe MSOs are the better vehicle. And wait a second, why have we been talking so much about ABS for 3 years when MSOs are unregulated and are probably a Better vehicle. It was very interesting position to, to be in in June. Have you. Do you agree that there's been a shift in mindset or is that maybe more of just like the public perception? And also what the heck is an mso?
[00:28:42] Speaker B: Yep, absolutely.
We'll start with that. Like an mso, a managed service organization.
As far as a transactional structure, it would really be where, you know, private equity or outside investment, call them non lawyers, you know, build up a structure to really supply or move all of the back office services that the law firm would do. Right. And so really the value shifts from in some aspects being all in the law firm to being in an MSO entity, which is where that private equity is going to invest. So they're going to invest in the team, the tech, the goodwill, the branding, the marketing. Right. The systems, everything else kind of comes in a non law firm entity and it's meant to really support that. So like lawyers do now and you go out and hire a marketing agency to help hire this other company to handle this. It's just packaging all that to really centralize those services and that leadership. But really to manage that from a regulatory standpoint, it's a non law firm. Right. So overall there's an interplay between the law firm and the MSO that has to be ethically followed. But that's really the support. The MSO is usually the acquiring entity in a transaction. So they will buy like the goodwill, the name, image, likeness.
Right. Especially with plaintiff firms and kind of carry that forward. What that allows is again, you know, make sure your agreements are there. But it allows private equity to move into the space. They don't have ownership of the law firm. They have a servicing relationship that has financial flow. And so.
[00:30:14] Speaker A: Well, and then. And the million dollar question, how much of a firm can you carve out into the MSO as a percentage of the entire. Is it 10%, is it 90%, does it depend or what's the kind of, what's the range that you're seeing?
[00:30:28] Speaker B: Yeah, I think our good ethics attorney would tell you it depends. Right. It's going to depend on the services that the firm's going to use, but it's going to be closer to 90% when you really look at everything that's going to be moved over to the MSO as compared to, you know, just having 10. So what that gives is it gives, you know, private equity in this investment, you know, the control over the services, everything else, but also the control over the flow of funds and you know, abs alternative business Structure. Arizona's really had been the lead Puerto Rico in January. It'll be interesting to see how that. But that's really like go register as a non attorney owned law firm. Right. And if you want private equity as your partner, fine, go through the filing process. But Arizona is slow, I think six, nine months probably to get through the ABS process. MSOs you can set up pretty quickly. So that has been the big movement and I would agree Gabriel, is that's.
[00:31:21] Speaker A: Well and, and on the ABS side too, there's the sort of Damocles where you're renewing every year or two.
Right. And that is I think the other huge. There's no existential risk hanging over you with an mso, correct?
[00:31:33] Speaker B: Yes. You're renewing every year. It's public. Right. From that side. So if you're forming an ABS and you're partnering with private equity. Right. That's a public disclosure. So the real thing with the MSO structure is maybe you are leaving some value and some funds flow and whatnot in the law firm. But it's, it's enough and it keeps, you know, a transaction and a private transaction more so than that. And, and we're seeing, you know, some. That' ABS as kind of one leg of the stool and MSO is another. And then you'll have the law firm and so to kind of complete that. And I think the biggest thing that somebody told me a few years ago when we were talking about, you know, this movement was when all of this really happens and the market just kind of is there will the regulatory of ABs versus non ABs, will that really matter? Right. Because you have tech companies out there, as you know, that operate like law firms. They're not law firms. But then you have some law firms that invest so heavily in tech they don't look like a law firm. And then you have these new MSOs that aren't. Right. You know. So overall I think it is a regulatory evolution challenge which Arizona moved first, Puerto Rico and we'll see what happens in Tennessee and Washington and other states as they kind of examine as well.
[00:32:43] Speaker A: Yeah, and there's a top down, there's, there's kind of the, the regulatory framework around equity ownership and then there's the kind of the inside out which is the UPL questioning on authorized practices law, which is what tech companies are talking about. Like how far does that boundary go? What actually is UPL when chat GPT is giving everyone free legal advice. Etc. Right. So that's a question for another time, but I do think it's being eaten away from both sides. Right. Like MSO is eating away at what is the law firm part and then unauthorized practice of law carving away at like what can be done by non lawyers and you're going to end up with very little I think left that is pure only lawyers can own and do this piece. So anyway, question for another time. Would love to discuss it with you but Tom, this has been really helpful. I really appreciate your expertise. You obviously have thought a lot about this. You have more insight into this part of the industry than anyone else. I really appreciate you joining today. Before you wrap up any just lightning round 2026, what do you think the high level trends are going to be for next year?
[00:33:49] Speaker B: Yeah, I think it's really as part of if you're running a plain of firm and you're looking at growth, right. You better be ready to invest in that growth. Right. To look at you know, things, you know Gabriel, like the service you guys offer and everything else. But overall like you have to invest in your business model or you have to be ready to acquire others. Right. Based on that growth and everything else based on geographic expansion. Because you're seeing it, I'm sure we're seeing it just more competitive on intake, case cost, everything else. Right. Or you have to be ready to be acquired. Because I do think 2026 is the year that especially PE that has moved specifically into this space. There's some major movement that will happen end of this year, beginning of next year. Right. That are just going to then set more of that ripple effect of look what's happened is my firm ready? And if it's not and you've been sitting back kind of like hey I make good money, I do this. I haven't really had my pedal down. I think you're in a situation that you need to at least look at.
Maybe I don't want to invest as much, maybe I don't have that energy level but really going to like what is my to get acquired plan. I want to be a top multiple. Right. So how to look at that and everything else? Because I think 26 you're going to see in the plaintiff space just significant movement, you know, quietly, privately, whatever. But those in the know, in this small pond, you're going to see that and I think that needs to be part of your strategic plan. If you're a plaintiff firm owner, invest in your firm or be ready to potentially be a.
[00:35:20] Speaker A: At the end of the day we're seeing professionalization come to the market. It's. It HAP has happened a couple times already in plaintiff industry with the advent of advertising, with the professionalization of the mid aughts and a lot of the scaling up and business framework coming into the personal injury market. And I think we're seeing it now with M and A, which is going to drive another wave of this. Regardless of whether you sell your law firm. It's going to be an interesting year, Tom. We'll talk again at the end of next year and see how it all shakes out and maybe even mid year. I really appreciate you being on the podcast today. I did think that you had snowflakes on your backdrop, but I'm beginning to think that may just be coral. For the viewers who are wondering, what are those things above your head? Are they antlers?
[00:36:01] Speaker B: No, they are coral. They are coral. So sit here on the coast of North Carolina. I know you're kind of over there, middle of the country, but from our standpoint, that's coral. So that's just picking up.
[00:36:12] Speaker A: There you go. There you go. I thought we were doing holiday theme, but I was wrong. Tom, thanks so much for being on the show today. I really appreciate it.
[00:36:18] Speaker B: Yeah, as always, Gabriel, appreciate it.
